Ok i know this question might have been beaten to death, but I am yet to find a good answer for this. I mean it seems to be following the “rules”. I know i can test it myself before putting in a month into it. If anyone can give me a clear answer as to WHY OR WHY NOT, I will really appreciate it. Thanks
As I have read, the Turtle Traders worked purely off price charts. They entered when price broke out from a prior range, either long if above or short if below.
If you look at the charts of the same markets they traded, or similar, the key thing that might have changed is volatility. This is used to develop the 20-day av true range which affects entry levels and stops. So the system should still work but with widely different ATR20 to when they were running the system, your entries and stops might differ significantly from what they might have done. So, while you might need to adjust what they called N, the ATR20, nothing else should have changed - prices go up, they go down.
Most clear answer i have had so far. Thanks
I am always very sceptical when people try to tell us the markets have changed. The markets don’t change, only price changes. If a strategy worked on pure TA 10 years ago it will work now. I try to always challenge these guys to show on the chart what has changed and they can’t do it.
However, as I said above, one thing that does change which is not easily apparent from the charts is volatility. This doesn’t show so well because the software we all trust to show us charts adjusts the screen scale so that the price action fills the whole screen space. This makes comparing volatility over different periods difficult. e.g. see the Dow for 2005. My chart shows all the price action confined within 1,000pts on the Dow, from 10,000 to 11,000, so about 10% of the starting value of the index. Then look at 2016: chart runs form about 15,400 to about 20,200, or about 30% of the starting value. But the two charts are the same size. So a strategy that works in low volatility time like 2005 might be wildly risky in a year like 2016: likewise a strategy that works in high volatility times could struggle to break even in ranging periods…
This is despite the obvious fact that some strategies are designed to work in break-outs and some to follow trends. Both these characteristics occurred in both periods but the volatility is the differing factor, not trendiness v’s ranginess.
This scaling issue also means you can never trust the angle of slope of a trendline or MA. Obviously, up is always up and down is always down, but I have seen some strategies that demand a steeper slope of one or the other to work - and this is a nonsense rule built on quicksand which will fail.
Best of luck.
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True that. I will visually back test the data from 1983 to 1996, Taking volatility into account. I do that for my grid trading strategy, Draw a channel so see where the price is bouncing. Is there any indicator that shows volatility as a number and not just between 0-100?
Gday bro
Some good people put some hours into this question over on this thread. Donchian Channel Trading
I think it’s fair to say trading donchian channel breaks is on of the few true and tried Technics that is valid (buy high sell higher). Although each individual must take the trading principle and make it their own.
The “Turtle” method was developed as an investment technique traded on the futures market. This is vastly different to speculating on the spot forex market. Back testing on the above thread demonstrated although “profitable” there was tweaks needed. And we explored some different variations. However we slowly drifted apart and never finalized our work.
Do enjoy the read and make up your own mind
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[quote=“tommor, post:4, topic:106098, full:true”]The markets don’t change, only price changes.
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I certainly understand the logic behind this statement.
However, with the increase in volatility and the emergence of algo/hft in the last 20 years, do you think that while historical price and current price movement appears similar, there is perhaps a difference in the behavior, tendancy or characteristics of price action that would affect the reliability of certain trading strategies that worked in the past?
Another words, is it possible that long term, price generaly moves the same today as 20 years ago, but arrives at that price while taking a slightly different, more volatile path, esp when viewed from a shorter term perspective? And if so, would this have a signifact impact on a traders strategy/system.
I ask because ive heard long time traders claim that markets do change with time and strategies must be modified to adjust to this change.
Do you think this is valid in any way?
Hi Pancho - I can only see on the charts that price fluctuates, volatility fluctuates and that price sometimes trends. Otherwise, a price chart from June 1997 looks just like a price chart from June 2017. So if the strategy depends on price action only, as long as it accounts for trending / trend failure and higher or lower volatility, then it will still work.
Its hard to think of a private retail trader’s strategy that is reliant on the big players NOT using HFT. What would this look like?
Of course the results might be wildly different if the strategy was developed during a period of consistently high volatility or low volatility, but an ideal system should allow for that. Like a trend-following system should allow for times when there is no trend.
What I think is easier to accept is that strategies that were imperfectly developed and don’t make the proper allowances for absence of trend or higher volatility do fail - but these were always unsuccessful plans anyway, they just hadn’t had a statistically large enough period of running for this to be proved. Like if they had planned that wearing a fur coat was the best thing to wear: but had not made an allowance for the summer weather that was eventually statistically certain to come along.
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Hi Tommor.
Thank you for your input. Its very much appreciated and valued.
Short answers, as I understand it:
It works but only in trending markets, not ranging markets.
It is subject to large drawdowns as whipsaws stop you out again and again.
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not heard of this one lol
It stopped working because as the turtle trading system became more popular, many traders started using the same system. As a result, the strategy became less profitable over time due to the increased competition. In addition, trends change over time. The signal horizon of 20 days that the turtles used in the past might not capture the trend for an instrument that is traded today. Instead of using a fixed lookback period, a trader should adapt his strategy to use an optimal lookback period to increase his risk adjusted returns.
Buying bullish break-outs and selling bearish break-outs has not stopped working. Probably never will. The basic principles used by the Turtles are still valid. Don’t get hung up on the entry signal - there is a lot of TA which does the same thing equally well or better.
Turtles’ basic principles -
- wait for the break-out, but then take every entry signal
- set every trade at the standard maximum trade size
- use a stop-loss from ATR20 so that no trade can go more than 2% down
- pyramid the winners aggressively, dragging the stop-loss each time